Earth economics studies the economy of our planet from the perspective of an autarkic system (a “closed economy”). It ignores the constituent national and regional parts of the planet economy and focuses on the whole. The book respects the heritages of IS/LM (Keynes) and neoclassical growth (Solow) not out of economic respect but because these tools are very useful in understanding the crisis and the policy response to that crisis.

More on Eartheconomics

Thursday, October 9, 2014

A recent background paper for the UN Commission for Development Planning takes up the issue of hetrogenity pointing out that whereas for the group of developing countries heterogeneity has increased global hetrogeneity is decreasing after a rise in the 1980 and 1990s. The working paper provides an alsternative measure (coefficient of variantion op per capita GDP) although for a much shorter period) for the metrics of global fragmentation applied in Chapters 13 and 14 of Earth Economics (C1 to C4 ratio and Herfindahl). The underlying data sources are identical.

Friday, September 5, 2014

New and exciting information appears in a new voxeu publication on secular stagnation
Global interests on average have moved into unknown territories. This makes the concept of the liquidity trap very relevant.

This
paper analyzes the case for the international coordination of macroprudential
policies in the context of a simple theoretical framework. Both domestic
macroprudential policies and prudential capital controls have international
spillovers through their impact on capital flows. The uncoordinated use of
macroprudential policies may lead to a "capital war" that depresses
global interest rates. International coordination of macroprudential policies
is not warranted, however, unless there is unemployment in some countries.
There is scope for Pareto-improving international policy coordination when one
part of the world is in a liquidity trap while the rest of the world
accumulates reserves for prudential reasons.

Globalization
is blamed for many socio-economic shortcomings. I discuss the consequences of
globalization by surveying the empirical globalization literature. My focus is
on the KOF indices of globalization (Dreher 2006a and Dreher et al. 2008a),
that have been used in more than 100 studies. Early studies using the KOF index
reported correlations between globalization and several outcome variables.
Studies published more recently identify causal effects. The evidence shows
that globalization has spurred economic growth, promoted gender equality, and
improved human rights. Moreover, globalization did not erode welfare state
activities, did not have any significant effect on labor market interaction and
hardly influenced market deregulation. It increased however within-country
income inequality. The consequences of globalization thus turn out to be
overall much more favorable than often conjectured in the public discourse.

Wednesday, April 2, 2014

In a recent working paper "Sluggish Postcrisis Growth: Policies, Secular Stagnation, and Outlook" Canuto, Nallari, and Griffith investigate why advanced economies continue to have low growth. Is this slow postcrisis growth the result of a policy response that was overly reliant on monetary policy, which ran into the zero interest rate lower bound before growth was restored? Looking deeper, is secular stagnation, which is related to the zero lower bound and was recently brought to the fore by Larry Summers, another potential cause for advanced economies’ failure to return to pre-crisis growth levels? This note seeks to answer these questions as well as identify what alternative policies might be pursued by advanced economies to escape secular stagnation, should stagnation proponents be proven correct. After a brief review of secular stagnation, Summers’ hypothesis is tested through a review of academic literature and opinion pieces. However, the secular stagnation theory is not without its critics; moreover, there is a debate between “Keynesian versus Schumpeterian” economists, which could help to shed light on the medium-term postcrisis outlook.

Monday, January 13, 2014

377 - DNB Working PaDate 22 May 2013
pers
We test the performance of various measures of global liquidity as early warning indicators of booms in house and equity prices in 20 OECD countries between 1970 and 2010. We use a panel probit approach to test the relative performance of global liquidity measures based on two aggregation schemes: the traditional measures, based on G5 data, and broader measures, based on data for up to 26 countries/currency areas.
Our results show that, in the last decade, global liquidity measures outperformed domestic measures as early warning indicators. Between the two global liquidity measures, G5 aggregates often outperformed broader global liquidity measures. The search for the best early warning indicator showed that the G5 real narrow money gap performed best for booms in house prices, while the global real private credit growth gap performed best for booms in equity prices, either when aggregated over G5 or over a broader sample of countries.
Nevertheless, given the rising importance of the emerging market economies and a declining share of G5 in global liquidity, the current superior performance of G5 measures may not warrant their superior performance in the future. Therefore, given the importance of global liquidity measures in warning about asset price booms, the need for constructing broader global liquidity measures is warranted.
Keywords: Early Warning Indicators, Asset Price Booms, Global Liquidity.
JEL Classification: E44, E51, F65, C53.
DNB working paper 377- Global liquidity as an early warning indicator of asset price booms ww.dnb.nl